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Retirement Planning

Is Long-Term Care in Your Financial Plan?

2021-02-22

You’ve probably covered the basics, such as housing, food, taxes, emergencies, and entertainment in your financial and retirement plan. What about long-term care costs?

Long-term care is an umbrella term referring to a range of personal or health-related services that you might need for an extended amount of  time. According to Genworth, an insurance company that conducts annual research on the need for and cost of long-term care, 7 out of 10 Americans will need some form of it during their lifetime. Research also shows that 20 percent of those who need long-term care will require it for five years or longer. 

While many military members assume their VA benefits or Medicaid will pay any long-term care costs, most will actually need to purchase long-term care insurance or rely on personal savings to cover the expense. 

Does Everyone Need a Long-Term Care Plan? 

Although long-term care is often associated with those above retirement age, anyone seriously injured by an accident or suffering a major illness might also need it. If you’re married, your financial plan should include long-term care considerations for both you and your spouse. 

The most commonly used form of long-term care in the U.S. is personal care, which is designed to fill the gap for any person who is not able to accomplish one or more “activities of daily living,” defined as eating, bathing, dressing, toileting, mobility, and grooming. While plenty of personal care is delivered within the patient’s home, nursing home support might be required for more serious conditions. That support is expensive, costing upwards of $7,700 per month for a semi-private room.

Funding Sources for Long-Term Care

For military-affiliated patients, there are four possible sources of long-term care funding that might apply. These include VA benefits, long-term care insurance, Medicaid, and self-pay. One or more of these options might apply based on the kinds of services you need. Keep in mind that TRICARE doesn’t cover long-term care expenses and Medicare covers very few, so your financial plan must incorporate one or more of the below options.

VA Benefits for Long-Term Care

Setting up your long-term care through the VA can be complex. Long-term care services offered through the VA include comfort care, physical therapy, around-the-clock nursing or medical care, caregiver support, and daily task assistance. However, this is only available if you are covered through a VA plan and your VA medical team has determined you need one or more of these services. 

Your ability to get VA long-term care is also contingent on whether or not there’s space in a nearby facility or a service provider in the local area capable of providing it. Community living centers run by the VA, non-VA community nursing homes, and state Veterans’ homes are all popular service centers for this kind of care.

One of the most important factors considered in the provision of long-term care through the VA is your service-related disability status.There are some benefits that don’t require you to have a percentage of disability, but they have income and asset limits. If you do qualify for VA benefits, you must use them before tapping into Medicaid

Long-Term Care Insurance

Coverage through private or military-related long-term care insurance policies can be very expensive. The long-term care insurance market has withstood higher-than-normal usage of many of these policies and several of these companies have folded or been acquired. Also, premiums have been going up each year on average. As of 2021, the average private long-term care insurance premium for a 60-year-old couple is $283 a month. 

Military employees or retirees and their spouses can potentially access long-term care insurance benefits through the Federal Long-Term Care Insurance Program. Qualified relatives can also apply, including domestic partners, parents, parents-in-law and adult children. 

Self-Pay 

Anyone who does not yet qualify for Medicaid and who do not have access to VA benefits or long-term care insurance might use their savings to cover long-term care. This can be a major disruption to your regular financial plan or your retirement savings, particularly if you or your spouse has a substantial need for extensive long-term care. 

Medicaid

To qualify for Medicaid payments for long-term care, a general rule of thumb is that every other source of payment has been exhausted. Most military servicemembers with substantial time in service and well-funded financial plans will not qualify immediately and there are many strict rules in place about transferring assets in an effort to qualify. 

The Bottom Line:

There are plenty of factors and options to consider, but the bottom line is the same: There’s a good chance that you or your spouse will need long-term care and you’ll need to plan ahead for how you’ll cover the cost.

Incorporating long-term care into your financial plan now means peace of mind and financial security when you need it the most. Connect with your AAFMAA Wealth Management & Trust Relationship Manager, who will work with you to establish or revise your financial plan to include long-term care costs and help you reach your goals.